How Ford Motor Company Will Take On Toyota's Prius

An all-new Ford hybrid will be aimed directly at Toyota's big-selling Prius.

You'd know that shape anywhere, wouldn't you? That distinctive look has helped make Toyota's Prius the world's best-selling hybrid by far. Now, Ford is aiming to give it some serious competition. Source: Toyota

Ford (NYSE:F) is finally planning a head-on challenge to the world's best-selling hybrid.

Trade publication Automotive News reported this past week that Ford will introduce an all-new line of hybrid cars. The new models are expected to arrive late in 2018.

The new model will be Ford's first "dedicated" hybrid, a vehicle designed from the ground up -- like Toyota's (NYSE:TM) Prius -- as a gasoline-electric hybrid.

But Ford already has hybrid versions of the Fusion and C-Max, and they sell fairly well. Developing an all-new dedicated hybrid model will mean a big investment for Ford.

It could cost a billion dollars or more to bring this new model to market. Why does Ford think it's worthwhile?

Why Ford is targeting the Prius To understand that, let's start by taking a look at hybrid sales in the U.S.

Ford's hybrids sell pretty well, but the Prius sells a lot better. Over the last few years, Toyota has expanded the Prius into a family of three models, but the original Prius sedan is still the top seller.

Ford's C-Max holds its own against the big Prius V, which is its most direct competitor. And the Fusion hybrid has always posted solid sales numbers.

But sales of both are dwarfed by those of the Prius sedan, which has been the world's best-selling hybrid by far for years now.

Why? In part, it's because the Prius is simply a great product. It's not exciting to drive, but it's an affordable, friendly vehicle that does exactly what it claims -- delivers great mileage with Toyota reliability.

But it's also because the Prius is unique: Inside and out, it looks like no other car.

That's important. Here's why.

Why the Prius is the best-selling hybridAt least in terms of its shape, the Prius sedan is an automotive version of the Birkenstock, the homely but-comfortable sandals that are popular among green-minded outdoorsy types.

Through three generations, the Prius's styling has always been kind of endearingly homely, like Birkenstock's sandal. But -- also like the Birkenstock -- it's distinctive. And it makes a statement.

The side profile shape of the Prius practically shouts, "This is a hybrid!" (In fact, it's so distinctive that Honda (NYSE:HMC) practically copied it line-for-line with its own dedicated hybrid, the Insight.)

Why is that important? Because lots of people choose vehicles that reflect their ideas about themselves.

Ford's Fusion Hybrid is a handsome sedan, but it doesn't shout "hybrid" like the Prius does. Source: Ford Motor Co.

Those people don't just buy hybrids, it turns out, because they want to save money on gas. They want to show that they're concerned about the environment, that they think reducing their gas consumption is important.

Put another way, they want people to know they're driving a hybrid.

The distinctive shape of the Prius accomplishes that in a way that a hybrid version of a mainstream model like the Fusion doesn't. (And inside, the Prius's futuristic dash and unique control layout help remind passengers -- and the driver -- that this isn't just another car.)

How Ford will challenge the PriusBy developing a dedicated hybrid, Ford won't just gain the advantage of having a car designed from the ground up around a hybrid drivetrain. Ford will also be able to give the car its own unique look.

It's a safe bet that this new Ford hybrid will be distinctive -- and Ford's marketing for the model will make it clear that it's special. (It's also a safe bet that, like the Prius, Ford will sell its new hybrid all over the world.)

The Automotive News report noted that Ford may offer a family of several dedicated hybrid models, just as Toyota does with its Prius. And like the Prius (and like Ford's current hybrids), there are likely to be premium-priced plug-in versions that can be charged up to give a limited electric-only range.

Ford's C-Max Hybrid has done well against the big Prius V, but it hasn't come close to challenging the Prius family in overall sales. Source: Ford Motor Co.

That may turn out to be a smart plan, at least in the near term. Well-executed electric cars like Tesla Motors' (NASDAQ:TSLA) Model S and Nissan's Leaf have sold fairly well, but recharging stations are still few and far between -- and neither has come close to the sales numbers posted by the Prius.

That's because the Prius combines a unique look (and an affordable price) with extremely simple functionality: You just fill it up at a gas station like any other car.

That formula has been a tremendous success for Toyota. And now, it looks like Ford is betting that it can use the same formula to find some success of its own.